Barclays Helps Startup Structure First Rated P2P Bond

Nov. 14 (Bloomberg) -- Barclays Plc and Morgan Stanley are
helping a California startup create a bond backed by peer-to-peer student loans in what the firm said would be the first deal
of its kind to get a credit rating.

The two banks were hired by Social Finance Inc., a peer-to-peer lender based in San Francisco, to structure and underwrite
the transaction, said Chief Financial Officer Saturnino Fanlo.
The deal will include $150 million in senior notes rated by
Toronto-based DBRS Inc. and may be graded A, the sixth-highest
investment-grade level, Fanlo said. The remaining $20 million
will be equity, he said.

“This is the first rated securitization for peer-to-peer
loans,” Fanlo said. “We’re trying to go all the way back to
when securitization started, before it got complex.”

SoFi is part of a growing industry that’s cutting out banks
by introducing borrowers online to individuals and institutions
that provide credit in return for yields that are typically
higher than 10-year Treasuries. LendingClub Corp., the largest
U.S. peer-to-peer lender, is valued at $2.3 billion, two people
with knowledge of the deal said this week.

Spokesmen for London-based Barclays, Morgan Stanley in New
York and DBRS declined to comment. Barclays will structure the
transaction while Morgan Stanley will serve as the underwriter,
with the deal expected to be completed next month, he said.

Harvard, Yale

SoFi said last month it has raised about $500 million in
debt and equity from venture capitalists, financial institutions
and alumni investors. The company provides refinancing for
federal and private student loans to graduates of 100 schools,
including Harvard University, Yale University, and seven members
of the University of California system.

To finance the loans, SoFi counts on alumni, who act as
lenders and investors. Money from alumni is pooled in funds for
each school, and SoFi raises additional capital from banks to
increase the size.

SoFi was co-founded in 2011 by Mike Cagney, a hedge-fund
manager, and the lender is backed by Renren Inc., the Chinese
social-networking website. Fanlo is a former Wells Fargo & Co.
executive and the former chief executive officer of KKR
Financial Holdings LLC, the specialty finance company.

SoFi competes with CommonBond Inc., a New York-based
student loan provider that raised more than $100 million in
September from investors including former Citigroup Inc. CEO
Vikram Pandit. CommonBond started last year and is now going
after students and graduates from 20 business schools.